The company's omni-channel system progressed smoothly in '17. Digitally driven new retail results gradually showed, inventory turnover increased, and revenue increased by 12%. Among them, offline channels relied on endogenous drivers for revenue growth of 5.5% and e-commerce channels increased 56%; on the profit side, in the context of reduced inventories in the main business and increased profits, the net profit increased by 60%. In '18, the company will continue to enhance its brand power and channel power, work with Xiaozi Technology to achieve digital consumer operations, and promote a flexible supply chain model. Currently, the company has a total market value of 4.5 billion dollars, 18PE16 X, and its valuation is not high. The company is in the second tier after Belle Series. The team operation capacity is at a leading level in the industry. While the main business is recovering, there are still expectations that it will extend to the digital fashion ecosystem in the future, so the bottom layout can grasp the valuation repair market. The company released its annual report. Revenue/operating profit/net profit attributable to mother for 2017 were 1,734/2.29/188 million, up 12.01%/60.25%, with basic earnings per share of 0.48 yuan; the dividend plan was to distribute cash dividends of 2.5 yuan (tax included) for every 10 shares; 17Q4 revenue/operating profit/net profit to mother were 529/0.53/0.48 million yuan, respectively, up 15.05%/22.66%/43.13% year on year. Driven by improved offline same-store quality and improved online operation efficiency, revenue increased 12% year-on-year to $1,734 billion in 2017. 1) The omni-channel marketing system has been established, and offline relies on endogenous steady growth, and online growth is rapid. Offline: Through the establishment of close partnerships with commercial groups such as Hong Kong New World, Parkson, Dashang, Bailian, Wanda, Tianhong, Maoye, and Wangfujing, offline channels achieved a year-on-year increase of 5.49% to 1,467 billion yuan in 2017, and the revenue share decreased by 4.05 pct to 86.14%. Among them, revenue from direct-run stores increased 5.75% year on year to 1.24 billion yuan, same store growth 6.33%, and net number of stores increased by 20 to 1,286; franchise revenue increased 4.1% year over year to 227 million yuan. The number of stores in the same middle and low single digits increased, and the number of stores decreased by 52 to 641. Online: Using big data systems to improve supply chain response speed and marketing accuracy, e-commerce channel sales revenue increased 56% to 236 million yuan, and the revenue share increased by 4.05 pcts to 13.86%. 2) The four major independent brands maintained a relatively rapid growth rate: Kisscat achieved revenue of 882 million (+4.53%), closed 34 stores to 1,051, with a slight increase in the same store; zSAzSazsu grew faster, achieving revenue of 124 million yuan (+40.65%), net opening of 24 stores to 112, which is expected to increase in single digits; tigrisso's revenue of 405 million yuan (20.16%), net sales of 4 to 418 stores are expected to increase in double digits; KissKitty's revenue is 1.94 million Yuan (7.85%), net closing of 30 stores to 265, and is expected to increase the number of single digits in the same store; other agency brands achieved revenue of 97.7 million yuan (+5.22%), and net opening of 4 to 81 stores. The net profit margin increased by 3.08pct to 10.71% under the combined influence of factors such as an increase in overall gross margin, a decrease in investment income, a reduction in asset impairment losses, an increase in government subsidies, and the merger of Kid Technology. 1) In '17, under the company's measures to improve the efficiency of omni-channel retail operations, while strengthening cost control and improving the settlement rate of shopping malls, the comprehensive gross margin increased by 0.59 pct to 57.75%. Among them, the online gross margin increased by 7.64 pct to 56.78%, and the offline gross margin increased by 0.08 pct to 58.15%. 2) The cost rate decreased by 1.38 pct to 44.08% during the period, with changes in sales rate/management rate/financial expense ratio of +0.4 pct/-1.47 pct/-0.31 pct, respectively. 3) Under the combined influence of factors such as an increase in investment income (+2.33 million yuan), a reduction in the calculation of asset impairment losses (a decrease of 10.61 million yuan), an increase in government subsidies (+3.32 million yuan), and Xiaozi Technology's consolidated statement (November 30 to December 31, Xiaozi Technology achieved net profit of 7.86 million yuan), net profit increased by 3.08pct to 10.71%, and net profit to mother increased 60.25% year-on-year to 188 million yuan. Inventory and receivables turnover accelerated, and net operating cash flow increased. Overall, growth indicators were healthy. The volume of low inventory in '17 reached 418 million yuan, an increase of 4.76% over the previous year, and the number of inventory turnover days decreased by 35 to 207 days. The size of accounts receivable reached $332 million, an increase of 30.71% over the previous year, and the number of turnaround days decreased by 5 to 58 days. Net operating cash flow increased by $58 million to $270 million over the same period last year. Overall, the operating indicators were healthy. It wholly acquired shares in Xiaozi Technology and entered the mobile internet marketing industry: Xiaozi Technology is mainly engaged in mobile application distribution and programmatic promotion, and has independently developed platforms such as Yuzu Mobile SSP, DSP, DMP and many mobile internet marketing expertise; at the same time, it has also established business partnerships with many mainstream Internet companies including Baidu, Tencent, and Qihoo 360, and has established media pools covering various media such as Head and Long Tail. From 2015 to 2017, Xiaozi Technology achieved net profits of 7.54 million yuan, 53.44 million yuan, and 67.91 million yuan respectively, and promised net profit deducted from 2017 to 2019 not less than 65 million yuan, 84.5 million yuan, and 10.9.85 million yuan. Through this acquisition, the company will build a “fashion+internet” fashion industry platform. On the one hand, it will accurately match users and expand the consumer base, and on the other hand, deeply cultivate existing users and increase the repurchase rate and sales conversion rate. In 2018, the company will focus on its main business to enhance its brand power and channel power, and enhance the digital operation level and supply chain efficiency of consumers. 1) Channel upgrades will be achieved through store image upgrading, department store efficiency improvement, and shopping center channel expansion; each brand will also enhance brand influence and communication power through online self-media and internet marketing. 2) Start a consumer operation project around the omnichannel model, use the technical advantages of Xiaozi Technology in the field of mobile internet marketing to build an accurate marketing system to achieve digital consumer operations. While expanding the consumer base, cultivate existing users, and increase the repurchase rate. 3) Based on the omni-channel new retail consumer operation platform and the omni-channel product lifecycle operation platform, the implementation of new retail is driven in all aspects through omnichannel product communication, price access, membership access, service access, and payment access. 4) Promote a flexible supply chain model, optimize production processes and launch intelligent manufacturing through flexible and personalized production in small batches and multiple batches. Profit forecasts and investment ratings. As a leading high-end multi-brand women's shoe group in China, the company has built a brand series that meets the needs of female customers of different ages and consumption levels. The main brand “KISSCAT” has a leading position in the market; it has now completed a nationwide layout, and the regional distribution is relatively balanced. Since 17 years, the direct channel structure has been optimized and adjusted to show results, same-store quality has improved, inventory has been reduced, and profit levels have increased; at the same time, an omni-channel retail system has been laid out to open up online and offline capital, product flow, and information flow, and e-commerce channels have achieved rapid growth. Combined with the annual development plan, EPS is estimated to be 0.65, 0.78, and 0.89 yuan respectively in 18-20. Currently, the total market value is 4.5 billion yuan, 18PE16X, and the short-term valuation is not high. In the medium to long term, the company is in the second tier after Belle. The team's operating capabilities are at a leading level in the industry. While the footwear business is recovering, there are still expectations that the digital fashion ecosystem will expand in the future. The bottom layout can grasp the valuation repair market and maintain “Prudent Recommendation -A”. Risk warning: The consumer environment continues to be sluggish, and the cultivation of multiple brands falls short of expectations.